Attorney General Jim Hood announced Monday that Mississippi and 10 other states have asked the U.S. Supreme Court to overturn a 1992 decision that effectively prohibited states from implementing sales taxes on online purchases.
In an amicus curiae brief, Attorney General Hood and other state attorneys general encouraged the court to hear arguments in Brohl v. Direct Marketing Association and reconsider a 1992 ruling that requires a business to have a physical presence in a state before states may collect sales and use taxes from that business.
With the remarkable increase in online shopping, the physical-presence requirement has placed local retailers at a disadvantage and thwarted states from collecting revenue that could have supported important government services.
“More and more, the marketplace is moving from Main Street to the Information Superhighway, and our local merchants are at an unfortunate disadvantage,” Attorney General Hood said. “If local stores are unable to compete with out-of-state online retailers, we lose jobs, an important tax base and a critical investment in our communities. We’re asking the Supreme Court to even the playing field for merchants and to allow the states to gain the revenue that should be due to them.”
According to the U.S. Census Bureau, e-commerce sales for U.S. retailers were about $300 billion in 2014 and e-commerce accounted for nearly 7 percent of all retail sales that year. Online sales were up more than 15 percent from the previous year, a trend expected to continue since most Americans own smartphones that often come preloaded with online shopping apps.
Retailers have argued against sales taxes on goods purchased online, stating that calculating thousands of tax rates based on a consumer’s location would be too great a burden. However, the states argue in their brief there is readily available software that can easily calculate tax on any sale.
Attorney General Hood said a sales tax on online purchases would especially benefit Mississippi because ongoing budget problems have led to layoffs and service reductions across state government.
Attorney General Hood called on the Legislature to enact an Internet sales tax to help balance the budget and support local merchants.
“At least 13 states now have laws to levy sales taxes on purchases through third-party affiliates like Amazon, for example,” Attorney General Hood said. “Courts in New York have upheld this type of tax, and I will be asking the Legislature to stand up for our local businesses and adopt a similar tax next year. I also remain hopeful that the brief we filed today will move the Supreme Court toward opening the door for states to collect sales tax on all Internet sales.”